How Banks Must Evolve to Thrive in an Ever-Changing Marketplace
The needs of tech savvy consumers are constantly evolving, placing ever-changing demands on the banking industry and its executives. Yet, in the race to keep up with technology, banks are far too often the “tortoise” in the equation, lumbering slowly along, burdened by legacy systems while their consumer “hares” continue to lap them. Given the extent to which our lives have become dependent on our smart devices, it just doesn’t stack up that the banking community remains powered—in large part—by core technology that dates back to a time when the Sony Walkman was all the rage. It’s nearly impossible for these legacy systems to keep up with consumer demands while simultaneously maintaining the longevity, profitability and efficiency required for banks to stay alive and thrive.
“In order to attract and retain employees and customers, legacy core banking technology needs to be left in the dust”
Legacy systems are one of the larger issues burdening small-to mid-sized financial institutions, but other challenges include the rise of real-time, mobile consumers’ expectations; tightening budgets accompanied by the demand to decrease operational costs; the increase in new regulations and maintaining compliance; and non-bank startups emerging as competition. Behind all of these challenges lies a common theme: needing to be able to embrace new and innovative technology—the key to increasing efficiencies while driving down costs and pleasing customers.
Below are a few steps small-and medium-sized financial institutions need to take in order to stay competitive with the banking behemoths and non-bank startups, and you guessed it, they all center around technology:
1. Transition from costly in-house systems to a newer, more efficient core: It’s been decades since the “most advanced” core banking system of its time was designed and adopted into market. It’s time technology catches up with the progression that’s been made in the industry throughout the last 40 years. Imagine logging into one system, one time and gaining immediate access to all data, customer information and reports needed to efficiently run a bank. Legacy systems are clunky and slow to respond—eating away at valuable time that could be spent attracting new customers. From customers. From an efficiency and internal usability standpoint, a conversion to a modern core makes sense.
2. Adapt to meet the demands of digital-age customers: Gone (almost) are the days where banking was done at an actual bank. As brick-and-mortars continue to disappear, executives need to find new ways to attract and retain customers. Customers these days run short on time and expect to be able to access accounts and complete transactions when and where it is convenient for them. Their frustration is mounting about having to log on to multiple platforms or click through multiple Web pages to access all account information, like balances and loan information. What customers want is a single, secure site that showcases all important, up-to-date (real-time) banking information in a one-stop shop.
3. Recognize the latest competition—non-bank startups—and do something about it: Non-bank startups are on the rise, threatening to take customers from traditional banks by offering quick adaptations to change and low costs. In order to compete, banks have to appeal to their customers on a personal and a usability level. By adapting technology that quickly provides data to answer customer inquiries, bankers are able to provide quality customer service for those on the go. Additionally, customers want access to their account information using one intuitive platform (as mentioned above). Whether logging on from a desktop, mobile phone, or tablet, information should remain consistent and easily accessible. By appealing to current and prospective customers with quality service and intuitive technology, banks can gain a leg up against the non-bank competition, especially if and when non-banks become tempered by regulations.
Adopting new technology and converting to a revolutionary core system may seem like a gamble—after all, it is the one system that powers an entire operation—but for smaller institutions, it’s a risk worth taking as the benefits far outweigh the fear of change in retrospect. Failing to adapt to the changing market can have lasting effects including a decline in customer base and lower employee productivity. Employees may also grow increasingly displeased with the time it takes to wait around for technology to produce simple results, such as the status of a loan application, ultimately leading to turnover and the associated cost of attrition.
In order to attract and retain employees and customers, legacy core banking technology needs to be left in the dust. All it takes is commitment from the financial institution and trust in the core provider. Customers have grown to trust technology with financial information, allowing them more freedom to make purchases, pay bills and transfer funds. It’s time financial institutions trust that technology can take their organization to the next level, providing customers with even more freedom and employees with less headaches.
Systems that increase efficiency, productivity and customer satisfaction by streamlining processes are out there. Still not convinced that now is not the time to make the switch? Do a bit of research on cutting-edge systems, and make sure to ask the right questions to ensure you fully understand the back-end technology before choosing to convert. Doing so will help put your mind at ease.